The numbers stack up

They say that once you work for yourself you never want to go back to working for someone else, but Thorn Lighting’s Nick Clark is the exception to the rule. Ben Cronin talks to the head of the manufacturer’s newly-formed Energy Solutions division about funding models for lighting upgrades

Tell us about your old company and why you decided to join Thorn

My company was called ES Lighting. There are a number of entrepreneurial companies looking at low-energy lighting. I was one of those and quite an early adopter, really - the company was formed in 2006. But it occurred to me that there was a huge void in the marketplace for a big brand to come in and dominate

There are far too many smaller organisations offering low-energy solutions, but not all of them are making a very good job of it. Thorn was looking at doing a venture for low-energy lighting. They caught me at the right moment and the rest is history.

Would it be fair to say that Thorn Energy Solutions is your own version of the Green Deal?

Effectively, it’s the same model. We also use the Carbon Trust’s new scheme with Siemens Financial Services. But when that scheme doesn’t fit the client, it’s a question of picking the right product.

The financing we do [through Thorn Energy Solutions] abides by the golden rule of the Green Deal: that the loan repayment will never exceed the savings you get from the project, so there’s always a net gain for the client during any repayment period. By the time the funding is paid back, the client sees all of the savings and it’s adding to profit. For some applications, that can be in as little as 18 months to two years. Certainly, with the way energy prices are moving at the moment, that payback period is only going to come down.

Is it hard to say exactly what the payback period will be when energy prices are fluctuating so much, or do you find companies are on fixed energy contracts?

A lot of energy contracts are coming to an end now. People were quite savvy when energy prices were low, but many companies I’m dealing with now have fixed-term contracts that are coming to an end and energy prices are only going to go up.

There are a few businesses out there that are currently enjoying very low energy costs. They are going to have to keep one eye on the future and be aware of the potential hitch of energy prices soaring by 50 per cent.

How difficult was it to set up Energy Solutions? Would you say it’s like a lender of last resort for firms that can’t access any of the other financing options you’ve mentioned?

No, definitely not. It’s really a case of understanding what the Carbon Trust can give and matching it.

When you have identified a client, you can very quickly work out whether it’s the right client to take down the Carbon Trust route in terms of the payback period and the size of the loan and, if we think it’s a good fit, we’ll absolutely go down the route of using it. However, we’d be very naive not to have our own funding in the background.

I was sad to see the Carbon Trust lose its funding, because I thought the interest-free loan scheme had so much more to give. It was a huge shame that it was removed and put into a Siemens loan, because at the end of the day they’re a commercial business and have to make money and now the Carbon Trust, because it lost its funding, also has to make money.

Do you think the industry suffers on account of some of the more unscrupulous energy consultancies out there?

Some companies - certainly not Thorn, nor my business when I was running it - aren’t up-front about existing loads and perhaps underestimate what the new installed loads are.

All fittings have got ballast losses but sometimes they’re left off. I think there’s a lot of that going on. It means true return on investment isn’t being reported.

As a rule, I’d much rather underestimate to a certain extent what the existing loads are - while being as accurate as you can - and overestimate what the new installed load is, because then you’re outperforming your own expectations and you’re making your client a whole lot happier.

And what do you think about the Green Deal?

The intention of the Green Deal was a good one when the government was trying to address fuel poverty. I don’t think the government should have opened it up to SMEs, but it has been done now. I don’t think SMEs really compare to the old lady trying to decide whether to put the three-bar fire on or cook another potato. I think that move just complicates things. It gets the focus away from the initial message about fuel poverty.

As a business, we’ll certainly get involved in the Green Deal but, speaking speculatively, if you were looking at promoting your services, are you going to go and speak to the elderly couple at the end of the street or are you going to speak to the small manufacturing facility?

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